John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111111), a candy company…

John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111111), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303. The company’s S corporation election was made on January 15, 2008. The following information was taken from the income statement for 2014.

Interest income $ 100,000

 Gross sales receipts 2,410,000

 Beginning inventory 9,607

 Direct labor (203,102)

 Direct materials purchased (278,143)

 Direct other costs (249,356)

Ending inventory 3,467

Salaries and wages (442,103)

Officers’ salaries (150,000)

Repairs (206,106)

Depreciation expense (15,254)

 Interest expense (35,222)

Rent expense (operating) (40,000)

Taxes (65,101)

 Charitable contributions (cash) (20,000)

 Advertising expenses (20,000)

Payroll penalties (15,000)

 Other deductions (59,899)

Book income 704,574

A comparative balance sheet appears below.

January 1, 2012 December 31, 2012

Cash                                                                                      $ 47,840               $ ?

 Accounts receivable                                                       93,100                123,104

 Inventories                                                                        9,607                    3,467

Prepaid expenses                                                            8,333                     17,582

 Building and equipment                                               138,203                185,348

Accumulated depreciation                                           (84,235)                (?)

Land                                                                                      2,000                     2,000

Total assets                                                                        $214,848             $844,422

Accounts payable                                                             $ 42,500              $ 72,300

Notes payable (less than 1 year)                                 4,500                    2,100

Notes payable (more than 1 year)                              26,700                 24,300

 Capital stock                                                                30,000                30,000

Retained earnings                                                         111,148                    ?

 Total liabilities and capital                                           $214,848             $844,422

Premium’s accounting firm provides the following additional information.

Distributions to shareholders                                                            $100,000

Beginnning balance, Accumulated adjustments account            $111,148

Using the preceding information, prepare a complete Form 1120S and Schedule K-1s for John Parsons and George Smith, 5607 20th Street, Cut and Shoot, TX 77303. If any in- formation is missing, make realistic assumptions.

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